Inexpensive, but luxury properties? In Bulgaria!

In the past year the portal ee24.com had debunked the overwhelming myth that high-quality real estate in Bulgaria can be very cheap. And how much does luxury real estate actually cost in Bulgaria? And in general, what kind of housing can be considered as luxury by Bulgarian standards?

In order to obtain the answers to these and other questions that we are interested in, we talked with Nikola Stoyanov, co-owner of "Chobanov and Stoyanov" company, which is precisely engaged in the construction of luxury housing at all resorts in Bulgaria (both on the coast and in the mountains). The company operates primarily "for Russia", because the Russians are the major buyers of such real estate.

- Why are there so few companies engaged in construction of luxury real estate in Bulgaria?

- 95% of buyers in Bulgaria acquire housing of economy class, that is, ordinary apartments, and only 5% are interested in elite housing. But, on the other hand, there are not so many companies in Bulgaria offering it. To sell luxury real estate a company veritably needs a great potential.One must know how to build houses, it is necessary to invite the best architects, it is necessary to carry out advertising campaigns and for this purpose it is important to have a powerful marketing department. All these significant elements of business cost much more expensive than to engage in economy class real estate. Cheap apartments are easier to sell, and now all the companies tend to engage in this business.

Before the crisis, we had a good market in England. Now our main efforts are mostly concentrated on the Russian market. 50% of purchases of luxury real estate in Bulgaria are made by Russiancustomers. We also have good sales in Kazakhstan; there are customers from Ukraine, Germany and Bulgaria itself.

- Is it true that the luxury real estate market in Bulgaria is in a crisis?

- Low segment had fallen after the crisis by 50-60%, while the premium segment in Bulgaria did not fall at all, because there are very few offers on the market, andthere is alwaysthe interest in elite real estate.

At the very beginning of our business, 10 years ago, almost all of the objects were sold on the British market. With the onset of the crisis in 2008, the British market in Bulgaria ceased to exist. The British customers, who have bought the real estatefrom us before the crisis, are now offering their property in the secondary market. Such objects are often bought by Russians.

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"Within the last two years the market is stable, while in Sunny Beach, Sozopol and Sofia prices begin to rise"
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The point is that the British customers were buying the real estate on credit. Before the crisis, it costs 2-3% per year in England. The British did not buy property for themselves, as the Russians actually do, but for the purpose of investment for rental or resale with a large profit.Before the crisis, there was a moment when the price within 3 years increased by 3 times. The last 2 years the market is stable, and in some places, such as Sunny Beach, Sozopol, Sofia, prices begin to rise. In 2013 in Sunny Beach the elite real estate increased by 4%, in Sofia by 2%.

The construction of a truly luxury homes began after the crisis. The standards have risen so that the real estate, which was built before the crisis under the naming of the "elite" is already not considered to be luxury real estate.

Where to look for luxury real estate in Bulgaria?

- What are the popular cities and regions of the country you could highlight?

- Customers from Russia are increasingly interested in the resorts on the Black Sea, it is the district of Varna, Bourgas and cities around them. Many customers purchase property in Sofia, it is most likely people who buy apartments for investment and rental purposes.

Many people purchasereal estate for a permanent residence, they develop business here. The business environment in Bulgaria is very liberal. Income tax is 10%, which isactually the lowest in Europe. Bulgaria is a member of the European Union, many Russians carry out their activities across Europe right from the Bulgarian office.

There is an obvious interest in ski resorts. Our company is now developing an object that is near the ski resort of Bansko - the most developed resort in Eastern Europe.

- What are your objects, which are under construction right now, and how long it takes to construct one building?

- Currently we have 4 properties in the process of construction. This is mostly low-rise construction, no more than 4 floors. In the area of ​​Sunny Beach we have 2 complexesbeing built –one is near Bourgas and the second one is to its south, in the Bulgarian St. Tropez, inLozinets village. One more project is in the mountains of Bulgaria near Bansko resort. This is unique complex, where there isa mineral water spring and a spa center on the territory of the complex.

The construction of a building takes no more than 18 months. But our buildings are quite small, we do not construct large-scale projects. Each complex has no more than 60 apartments. We spend a lot of efforts on the elite finishing;we pay attentionto the small details.

"Luxury" Bulgaria - at the price of "normal" Spain

- What is the level of prices for your real estate?

- For the same price you can buy elite real estate in Bulgaria and economy class housing in Spain, Italy and other Western European countries.

We have excellent gated complexes, on the beachfront, where you can buy apartments from €1.5 thousand per square meter. Our "Belle Epoque" is on the first line, close to the beach, and the prices there are the same, that is about €1.5 thousand per square meter. Luxury apartments in Bulgaria cost from €50 thousand to €250 thousand.There are studio apartment available, two- and three-bedroom apartments and penthouses as well. At the same time we have free planning apartments and any of them can be modified.

- How expensive is real estate at the ski resorts?

- It's cheaper than the sea, within the framework of €1,100-1,200. In our projects a square meter costs about €1,000.

- Are the villas popular?

- Villas in Bulgaria are popular but to build them is 2 times more expensive, the prime cost is 2 times more expensive. But we have a village where we have already constructed 5villas and we are going to build another 5 villas. But we need to find a special client because the prices for villas are high - from €150 thousand to €350 thousand.

- What is the yield from rental of luxury apartments in Bulgaria?

- If you buy luxury properties in cities such as Sofia, Plovdiv, Varna and Burgas, it generates good income according to European standards. This is about 10% per annum. At the resorts on the sea and in the mountains rental has a seasonal character and the yield is about 5% per annum.

- What are the Russians looking for in Bulgaria?

- Luxury real estate in Bulgaria is not very familiar to the Russian market, because most customers are interested in low-budget options. But the number of Russians who purchase precisely the elite real estatein Bulgaria tends to increase more and more. They suppose that our prices are interesting enough.

I said that the majority of Russian buyers associate Bulgaria with cheap real estate. Our company, "Chobanov and Stoyanov" within the first five years of its development also was engaged inconstruction in the middle segment.After the crisis, since 2009 our company is fully concentrated on the premium market, because we have enough experience in construction, and we found good customers.

- How to break the stereotype about the cheap real estate in Bulgaria?

- This kind of image of the country veritably prevents the development of the elite segment of the market, but we still believe that the future of our company is exactly in this particular segment. In Bulgaria, there are a few building companies, which develop elite complexes, but as I have alreadymentioned, we have an audience of customers who actually like what we are building.

I strongly believe that in a few years Russian public will already realize that our country can also offer good objects for wealthy customers who are looking for special treatment and special services. Many clients feel more comfortable exactly in Bulgaria, because there is no language barrier, but there is a common religion and history.

- Will the new standards of construction increase the cost of housing in Bulgaria?

- Currently there is a discussion among building companiesabout price increases for construction in Bulgaria. From the next year we will have new standards for fire safety, construction, protection from natural disasters and accidents.

We have to design more precisely, and these standards will lead to higher prices for construction costs. The new standards are related to all the segments of the construction. My colleagues and I, with other property developers, estimated that it would increase the cost by 15%. Sales prices will rise by at least 10%.

Additional expenses for the purchase and possession of the elite housing in Bulgaria

- Is it easy to receive a mortgage loan in Bulgaria?

- Bulgaria is a country in Europe, and mortgage loans are issued on more favorable terms than in Russia, for example. Interest rate varies from 7 to 8% per year.

There is one significant problem: the banks are very conservative in Bulgaria and they almost do not give mortgage loans to the Russian customers. Therefore, they have to buy either for cash or to receive mortgages from us, building companies. There is an installment systemup to 10 yearsin one of our projects. It is the only luxury complex in Bulgaria, where payment by instalmentsis possible within 10 years. Annual rate is 12%.

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- How expensive are the maintenance costs of the luxury real estate?

- It costs from €10 to €15 per square meter per year. The annual maintenance of housing with an area of 100 square meters will cost approximately €1,000 or a little more. This includes the property management, cleaning of the complex, in one word,all the mandatory fees in a gated complex. I suppose that it is the lowest price for this type of real estate maintenance. In Bulgaria there is also an annual tax on the real estate, but it is one of the lowest in Europe.